(163 PLN, 0,00%) has announced new guidance for revenues at PLN 18.9bn (+18.6% y/y) and net profit at PLN 9.64bn (+111.1% y/y) in full-year 2011. The new guidance is 17.8% and 15.6% respectively above the guidance published 31 January 2011 and 1.6% lower and 9.8% higher than our forecast. The company also upped its expectations for the average copper price by 9.8% to US$ 9,000/tonne and the average silver price by 28.0% to US$ 32.0/troz in 2011. also increased its investment expenditures by 19% to PLN 10.76bn in 2011. The expected average production costs from own deposits fell by 8.7% to PLN 11,532/t, which is 2.4% below our expected level of PLN 11,809/t.
Our view:
We view the news positively as the new guidance is slightly higher than our expectations. The company’s forecast stays 9.8% above our estimate of PLN 8.78bn, with copper production higher by 5% than our forecast. The other element is investments, with almost PLN 11bn in capital investments planned for 2011. This suggests that some M&A activity is in the pipeline and that we might see the purchase of some deposits in the next three months. While the management has already hinted at such a move, it now seems more likely that the purchase will take place this year. The CEO previously announced that was working hard to acquire an operating copper mine either in Europe or America. The lower cost base of the company reflected in the lower cost per mined unit from own deposits is due to the higher silver price and to some extent to cost containment measures. The assumed copper price of US$ 9,000/t indicates that the company expects only a slight fall of 4.5% in raw material prices from the current levels, which is definitely positive news. Year-to-date copper prices stand at US$ 9,381/t.
(Recommendation: Buy; Fair Value: 212.20 PLN)